Based on the amount of reputation they need to have, it seems like you'd have to spend a ton of time on Stack Overflow or get lucky on those "answers that keep on giving" to become a moderator (you know what I mean, that one question that gets like 450 upvotes even though it's a really boring simple answer).

How much time do moderators spend on Stack Overflow? I'm surprised they'd have enough time if they also had a full time job. Is being a moderator their primary occupation?

"I'm surprised they'd have enough time if they also had a full time job." LOL! I have a full-time job, a part-time job, and I'm back in school (one class only though, for the moment). Moderating is just a hobby, just like any other contribution to Stack Overflow.
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Bill the LizardMay 12 '12 at 2:09

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@Bill the Lizard: o_O And I thought I had "only" two classes...
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BoltClock's a UnicornMay 12 '12 at 2:22

3 Answers
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We take up moderation as a voluntary role. That said, on Stack Overflow we're kept in light check:

While being a community moderarator [sic] is a volunteer (but often elected) position, and participation is strictly voluntary at all times, we do require two important things of all elected community moderators.

You must accept the community moderator agreement within 30 days of election or appointment.

On Stack Overflow, due to its immense size and scale, there is another requirement. If you spend time on the site participating but aren’t regularly resolving flags, you may cede your right to remain a community moderator.

The rest of this answer is largely an individual anecdote; I do not speak for the other Stack Overflow moderators or on behalf of management.

From being elected in November 2011 to last month (~5 months), I was on medical leave and so I had all the time in the world to moderate. In those 5 months I spent virtually all day on the site. I have no regrets.

Now I'm back at school, so I spend considerably less time on the site, whether it's asking/answering questions or doing actual moderation work. I still have a couple of tabs that are open pretty much all day, but I don't refresh or browse them as zealously as before...

In any case, you'll still see me around, and it's not because of reputation or because of any obligation (it's entirely voluntary), but because I enjoy coming here.

First off, getting a bunch of upvotes does not make you a mod. Being a moderator has not too much relation with rep-- just `cos you have a bunch of rep doesn't mean that you are a good mod candidate.

That being said, at 10k and 20k rep, you do get access to quite a few moderator tools. These reduce the burden on the diamond mods, but you're not compelled to use them. On the other hand, diamond mods keep their modship only if they are active (I'll loof for a reference for this.)

Mods are elected by the community. While rep is a rough metric, mods aren't elected just on the basis of rep. Check out SO's mods (scroll down). Their rep varies wildly, ad we have tons of higher-reps. In fact, the only high-rep on that page(the first two pages) with mod powers is Marc Gravell. And he's an SE employee (though I hear he got the diamond via the normal route as well)

OK. Back to the question. Not being a mod myself, I don't know--but you only need to give 1-2 hours a day for moderating. If you and your fellow mods on a site are good, then you really need not actively spend time. Keep an X.SE tab open and keep an eye on the tools popup/new questions. If you see something new, take a look at it. On larger sites, I guess the mods don't really look at new questions but rely on the other folks online to comment on them for improving/may be closed. And, of course, we have the flag system so even the guys with 1 rep can bring something to the attention of the mods.

Note that as a site gets larger, new mods are elected every year (Only if it's necessary). So the workload evens out. And of course, the more 20ks you get, the easier it is to moderate.

Being a mod isn't a primary occupation--SE doesn't pay them{*}. It's completely a volunteer job. You volunteer for the elections, and the community chooses you.

*Except for SE Inc. employees--but they're not really mods(as in, they're not expected to moderate; though they do help out in this department on betas). They have the diamond and mod-ninja powers, though

We don't need to set aside a certain amount of time for moderation per se, especially if we don't have much time to simply be around at all. However, if we do have time to spend participating on our site, but we're not doing much moderation work at all, then it may show that we just aren't all that keen on moderating. Of course we can take breaks as and when we want to, but there's a difference between taking a break and flat-out refusing to do what we were elected to do.
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BoltClock's a UnicornMay 12 '12 at 2:05

No moderator is paid as they are all volunteers. After they set up another bot to grind for Digimons, and sup the tears of destroyed spammers, they start cutting themselves cheques from all the anal bandage royalties in dealing with the trolls and bad seeds of the site.

A moderator's main function is to keep the site jerk free, and the level of commitment and time varies between them. It depends on when they're awake, when the flag beacon whispers dark horrors in their sleep and the usual trawling of the site. It also depends on how active the user base is in self-moderating. The more active the base (closing, user shaping, editing and flagging spam as necessary) the less time you'll see moderators needing to step in to thrown down a bag of oranges.

The correlation between highish EXP and a moderator comes from the drive they have to access more tools to help with the quality control of the vertical. The actions they carry out with the level and privileges they have help other users frame a mindset on what type of user they are and if they're responsible enough to be nominated or even elected.